Summary of work: The transduction of insulin signal involves a cascade of phosphorylation and dephosphorylation events. Upon insulin binding, the tyrosine kinase function of the insulin receptor is enhanced by autophosphorylation. Protein tyrosine phosphatases (PTPases) dephosphorylate key tyrosyl residues from the insulin receptor, thereby terminating insulin action. Thus, PTPases may delay activation of the insulin receptor and contribute to insulin resistance. PTPase LAR is a transmembrane PTPase expressed in insulin-sensitive tissues whose expression is increased in Type 2 diabetes. In this study, the extent of insulin receptor phosphorylation has been evaluated in cultured hepatoma cells overexpressing LAR. Immunoprecipitation and Western blot analyses have revealed that LAR reduces the phosphorylation levels of ligand-activated insulin receptors. Pretreatment of the cells with 3S-peptide-I abolished dephosphorylation of the insulin receptor by LAR and was associated with a doubling of receptor phosphorylation levels in the presence of insulin. 3S-Peptide-I is a synthetic tris-sulfotyrosyl dodecapeptide that selectively enhances insulin signal transduction which includes phosphatidylinositol 3-kinase and mitogen-activated protein kinase while having no effect on EGF-stimulated responses. Thus, the ability of 3S-peptide-I to inhibit LAR activity may provide new ways to treat Type 2 diabetes and obesity.